Carla Baca - Director of Corporate Communications Bethany Mancini - Corporate Communications Todd Meredith - Executive Vice President, Investments David Emery - Chairman and Chief Executive Officer Doug Whitman - Executive Vice President, Corporate Finance Scott Holmes - Executive Vice President and Chief Financial Officer.

Jeff Gaston - KeyBanc Capital Markets Kevin Tyler - Green Street Advisors Daniel Bernstein - Stifel, Nicolaus & Co Michael Carroll - RBC Capital Markets.

Good morning, and welcome to the Healthcare Realty Trust's Second Quarter Analyst Call. All participants will be in a listen only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to David Emery, Chairman and CEO. Please go ahead..

Thank you. Good morning everyone. Joining us on the call today are Scott Holmes, Doug Whitman, Todd Meredith, Carla Baca and Bethany Mancini. Ms. Baca will now read the disclaimer..

Except for the historical information contained within, the matters discussed in this call may contain forward-looking statements that involve estimates, assumptions, risks and uncertainties. These risks are more specifically discussed in the Form 10-K filed with the SEC for the year-ended December 31, 2014.

These forward-looking statements represent the company's judgment as of the date of this call. The company disclaims any obligation to update this forward-looking material. The matters discussed in this call may also contain certain non-GAAP financial measures, such as funds from operations, FFO or FFO per share.

A reconciliation of these measures to the most comparable GAAP financial measures may be found in the company's earnings press release for the second quarter ended June 30, 2015. The company's earnings press release, supplemental information, Forms 10-Q and 10-K are available on the company's website..

Thank you. We’re pleased to report earnings for the second quarter. Higher revenue and FFO in the first half of 2015 reflected positive operating metrics and strong internal growth.

Highlighting the quality of Healthcare Realty’s portfolio, stable tenants, superior rent coverage and low fungibility characteristics created a sustainable business model that is resilient and compounds NAV over time.

In the long run, the compounding power of rent growth far outweighs the benefits of just heap leach spreads investing this is becoming even more critical in light of current industry events and the trajectory of healthcare, which is waiting out weaker health systems.

With that said, its management’s imperative to invest in properties that not only provide accretion but more importantly advance, not dilute the sustainable growth for the existing portfolio. The current consolidation among health insurance companies is not surprising.

Giving that health systems have been consolidating for years and the governments influence on insurers is growing even more and the expansion of Medicare and Medicaid.

As hospitals and physicians further align to reap the benefits of scale and competitive advantage in this marketplace, they continue to ship healthcare delivery to lower cost outpatient settings.

The outpatient care has been expanding for decades, but now as being propelled by federal reimbursement policy that is transferring risk to providers - to provide better patient outcomes at lower costs. This progression validates Healthcare Realty’s direction and amplifies our long-term strategy.

We continue to see the benefits from 22 years of selective investing and outpatient properties on campuses of credit rated market dominant health systems. In discussions about new patient facilities or more active then we’ve seen in some time.

We are moving forward with several development projects on campus facilities with significantly leasing from hospital driven services. As better long-term returns and lower risk relative to most acquisition offerings.

Given the growth projections of the healthcare sector and expansion of medical office real estate we believe the prospects for business model remains bright and our value as the company with a long-held commitment to the outpatient sector unmatched. Now as we do each quarter, Ms.

Mancini is going to summarize views on our current events and trends related to the healthcare industry.

Bethany?.

The healthcare industry continues to evolve with the progression of perform implementation and economic trends. Hospital companies are reporting higher patient volume and improved operating fundamentals attributing more of the gains to the economy and company specific initiatives then to the increased in last quarter's health exchange enrollments.

However, the Affordable Care Act and its broad ramifications are having an industry wide impact on healthcare provider, insurers and patients' alike driving services toward outpatient care, consolidation and greater demand for medical office space.

The Supreme Court decision in June to uphold federal subsidies to exchange and relieve across all states. Likely solidified the ACA’s infusion into the nation's healthcare system.

Any ongoing legal or congressional battles over the ACA and its financing are expected to be limited to narrow attacks on smaller items and should allow for relatively stable 18 months in healthcare policy leading up to the next election.

The higher costs of health exchanges and Medicaid expansion along with constrained reimbursement rates are advancing the shift toward lower cost outpatient care at an increasingly fast pace. Especially, as the popularity of government’s subsidized health plans grows and the ensuing role of the federal government expand in the insurance industry.

At the same time with the aging of the population and the rise in Medicare enrollees the younger generation is taking seriously the funding of entitlements and long-term changes to Medicare's financing and benefit structure will soon be necessary.

The ACA’s push toward risk-based payment models for Medicare and paying for quality over volumes are reinforcing outpatient services as a critical component in the least painful path to a more financially sustainable future.

Outpatient care now comprises approximately 65% of hospital revenues this percentage will likely grow as health systems are actively acquiring physician practices to create clinically integrated networks that allow them to participate in coordinated care models as well as increase their referral base.

Interestingly it has been health systems initiatives in anticipation of ACA incentive that have led to provider and physician consolidation, which have in turn increase their leverage with insurers and improved pricing. The insurance industry is responding to this another rising cost pursuing consolidation among its largest managed care organization.

In this environment physicians and health systems with significant market share, should continue to garner solid price increases from insurers.

The fact that Healthcare Realty invests in physician office facilities that are closely aligned with market-leading and credit rated hospital translates to pricing power for a tenant with a physician for them to manage risk as payment models evolve.

Approximately 80% of the company's outpatient facilities are located on hospital campuses at approximately 89% are affiliated with credit rated health systems resulting in high demand for space and tenant retention and the ability to grow rental income steadily.

Moreover, the company’s portfolio comprises a diverse base of physician, tenants across more than 30 specialty with relatively lower concentration of Medicare and Medicaid patient and high rank coverage.

Two reasons industry report showed physician compensation increased in 2014, one by Medscape estimating compensation by specialty increasing on average 6.2% last year. In a healthcare sector characterized by political headlines and reimbursement ambiguity it’s the underlying value of main driven real estate.

Uninvestment-grade hospital campuses paired with rising patient utilization and outpatient trends that is creating incremental demand for medical office space. The Center for Medicare and Medicaid Services expects rising national health spending on physician and clinical services having increased 4.8% last year versus 3.8% the prior year.

Our commitment to medical office properties and quality health system partners will continue to ensure Healthcare Realty’s success, it’s the natural progression of health reform unfolds. David..

Thank you, Bethany. Now on to Mr. Whitman who is going to give us balance sheet, capital market activity et cetera.

Doug?.

Thank you, David. During the quarter the company was active in the capital markets and with disposition. We took advantage of a window in the interest rate environment and strong demand from fixed income investors to issue $250 million of tenure senior notes at a coupon rate of 3.875%.

In conjunction with this offering, the company called its $300 million senior notes through January 2017 at a coupon rate of 6.5%. That redemption occurred in mid-May.

This transaction lowers our interest expense by $9.5 million annually and extends the weighted maturity of our long-term debt by more than two years with our nearest bond maturity now being in 2021.

We continue to see strong demand and low cap rates for stabilized healthcare properties, so we have the opportunity to make selective dispositions that provide capital which we can recycle into assets with better long-term growth as well as improve our balance sheet.

At the end of the quarter we sold orthopedic surgical hospital and the adjoining MOB in a highly competitive process for $97 million which represented 6.3% cap rate. We used most of these proceeds to fund the make-whole payment on our made bond redemption as well as the $50 million principal difference between the 2017 and 2025 bond.

The cap rate on this sale was below the interest rate on the recently redeemed 2017 bond. The net accretion in 2015 from the new bond issuance, the redemption of the 2017 bonds and the sale of the orthopedic hospital was approximately $0.03 per share.

Another benefit of this disposition is that to provide an insight into current valuations for specialty inpatient facilities that rarely trade. Based on discussions with investors we’ve throughout the year most are undervaluing in this type of asset by 150 basis points to 200 basis points.

The two specialty surgical hospitals that we still own both released by market-leading A rated health systems generated about $17.5 million of NOI annually, which at the 6.3% market cap rate we just validated suggest that there is an incremental value to HR shareholders of $0.50 to $0.60 per share from those two properties alone.

While this difference between actual and perceived value for specialty surgical hospitals was pronounced. We are seeing similar in this pricing of other asset types such as inpatient rehab facilities.

The smaller size and lower interest rate of our 2025 bonds, repayment of several mortgages that were assumed in conjunction with previous acquisitions and the continuing growth from our existing portfolio and development conversion properties all contribute to our improving debt metrics, which are at their best levels in the past few years.

Our debt-to-EBITDA ratio was fall into 6.2 times, our debt-to-total capital stands at 41.6% and our fixed charge coverage ratio was increased to 3.0 times.

As we look ahead, we will continue to be cautious in raising additional debt or equity balancing the need to fund new investments accretively while maintaining a strong and flexible balance sheet and allowing our shareholders to benefit from the solid FFO growth expected in upcoming quarters..

Okay, Doug. Thank you so much. Now, on to Mr. Holmes, who is results of operations and other financial matters.

Scott?.

The company reported second quarter normalized FFO per share of $0.39 and NAREIT defined FFO per diluted share of $0.05.

The normalizing items for the second quarter include an add-back for the loss on extinguishment of debt of $28 million and for the pension settlement of $5.3 million both of which were previously disclosed and for the impairment of internally developed software of $700,000 and for acquisition cost of $200,000.

For the second quarter, the Board of Directors declared a dividend of $0.30 per share and the dividend payout percentage based on normalized FFO is 76.9%.

In the same-store pool for the second quarter, the trailing 12-month NOI growth rate over the same period a year ago was 7.5% for the multi-tenant properties and 4.3% for the single tenant net leased properties for a blended NOI growth rate of 6.7%.

The more predictive same-store metrics for the second quarter were contractual rent increases of 3.1%, cash leasing spreads for renewals of 5%, tenant retention of 87.3% and the average yield on renewal leases increased by 100 basis points.

Of the 166,400 square feet renewed in the same store pool this quarter only 10.7% had a cash leasing spread below 3% were 50.1% had a cash leasing spread of 5% or more and 6.3% had double-digit cash leasing spreads much of it at certain properties in Washington DC, Honolulu and Houston.

These metrics are partially reflected in the average rental rate per occupied square foot in the same-store pool which increased by 2% year-over-year in the multi-tenant portfolio and 2.4% in the single-tenant net leased properties.

With a history of positive releasing spreads our portfolio’s inherent lease turnover affords the ability to continually adapt to operational and economic conditions. Compared to the first quarter, occupancy increased or held steady across the board throughout our portfolio.

Total occupancy increased from 86.6% to 86.7%, inclusive of recent acquisitions with occupancy of 93.0%. We continue to be pleased with the direction of our leasing initiatives and our operational expense management.

The company’s strong tenant retention reflects the low fungible nature of the assets, enabling us to maintain positive cash leasing spreads, improve re-leasing yields and consistent annual rent bumps. These positive indicators reflect strong momentum for the key drivers to the company's future revenue growth..

Thanks, Scott. Now onto Mr. Meredith to cover some of the development recent investment activity. Todd..

During the second quarter Healthcare Realty purchase one property sold three property an initiated to developments. In June the company bought 35,600 square foot on-campus MOB for $13.99. The property is located in Seattle on the same campus where the company pick up 60,200 square foot MOB last December were $22.7 million.

Healthcare Realty now owns the only two Class A MOB’s on this campus. This brings us to nearly 1 million square foot and 14 buildings in five markets that are associated with A rated Catholic Health Initiatives’ the seventh largest health system in the U.S.

Year-to-date the company is acquired two properties for $53.2 million and currently has two properties under contract for another $34.5 million both of which close in the third quarter.

Including these properties in a couple more in the pipeline we are refining our 2015 acquisition expectations to $100 million to $150 million and remain pleased with the availability of attractive properties.

Accordingly we are also lowering our acquisition cap rate guidance range by 25 basis points, now 5.75% to 6.25% and more in line with recent transactions for desirable properties.

The company sold three properties during the second quarter for $98 million two of these properties closed on June 30 for $97 million and include 117,500 square foot inpatient surgical facility and attached 58,500 square foot MOB located in Indianapolis.

The fourth property closed in July for $18.3 million bringing total dispositions to $116.59 so far in 2015. For the couple more asset sales expected in the third and fourth quarter were tightening our disposition guidance to $125 million to $150 million.

This position cap rates are expected to average around 6% for the year weighted heavily by the $97 million closing at the end of the second quarter. In the current environment recycling selected asset in the higher quality properties at favorable cap rates remains valuable.

In the second we initiated development of a 90,000 square foot on-campus MOB with a budget of $26.5 marking our third MOB on the St. Anthony Hospital campus in Denver and another hospital associated with Catholic Health Initiatives. The hospitals committed to lease 35% initially and as indicated a need for additional 20%.

We also started development activity on 12,900 square foot retail property in Austin and response to demand and as an amenity for two of our existing MOB associated with Baylor Scott & White. As you’d expect an inbuilt situation most of the available space is already spoken.

We continue to work on several other MOB development opportunities with another start likely by early 2016. Stabilize development yields are projected to range from 6.75% to 8% depending on initial leasing commitments.

We do development and redevelopment is an attractive way to meet the rising demand for outpatient services, build relationships with targeted health systems and generate stabilizer turns well in excess of comparable acquisition cap rate.

With more liquidity and increasing transparency in MOB sector, the investment committee is naturally becoming more discerning about the differences in MOB quality and taking a closer look at the attributes of assets and portfolios, in terms of market strength, alignment with leading health systems and precise locations.

For too long many have been applying cap rate spreads as little as 25 or 50 basis points based on the most obvious difference of on-campus versus off-campus assets, and largely unable to discern the quality of the health systems, precise locations, and propensity for market rent growth.

In our view, private market cap rates vary as much as 200 basis points for stabilized MOB properties. For example, off-campus properties with affiliations with third tier unrated operators have traded for cap rate to 7% even 8% or more in less urban setting.

At the other extreme, on-campus property is well occupied by top-tier investment grade market-leading health systems command mid 5% cap rates are even lower in more dense urban markets. The value of an MOB is certainly improved by basic real estate fundamentals such as density and location.

The vast majority of Healthcare Realty’s existing assets are located in larger markets and in superior on-campus location. 82% of the company’s MOB properties are located in the largest 50 MSAs.

Markets with populations of over a million people and 80% of Healthcare Realty’s MOB properties are located on or directly adjacent to a hospital campus with another 9% off-campus and anchored by health systems. Five years into the Affordable Care Act, the key thesis remains true and more critical than ever.

Strong health systems are gaining market share and have become more dominant, while weaker health systems have become less relevant and financially strained.

Weak health systems generate little demand for medical office space because they cannot adequately negotiate favorable reimbursement contracts invest in critical IT systems or attract key physicians and providers. Healthcare Reality has long maintained a discipline of awarding these weaker systems.

In our experience properties associated with leading systems are more highly valued, because they produce stronger demand for space, higher tenant retention and robust contractual rent bumps and leasing spreads. In this context it’s more important than ever to align with leading systems.

In our target universe there are over 4,000 hospitals in the U.S. owned by about 1,500 health systems. We focus primarily on the top-tier of these health systems. 85% of the Healthcare Realty’s MOB properties are associated with modern healthcare’s top 100 health systems ranked by revenue.

These top 100 health systems own 1,700 hospitals and each system has revenue ranging from $1.9 billion to over $50 billion. Systems of this scale have the market share and financial putting to thrive in the first ACA environment. Properties located on the campus of these top-tier health systems have perform well through many market cycles.

But rather than relying on just one dimension of our portfolio, our objective is to own properties with the optimum combination of three characteristics. Top-tier health system alignment, top-tier market presence and on-campus hospital linked locations. We’ve added some disclosure around these key characteristics on Page 11 of our supplemental.

Healthcare Realty is well-positioned with outpatient demand expected to expand quickly in the years ahead to create value through a well-balanced strategy of internal growth, acquisition, selective disposition, development and strategic redevelopment..

Okay, Todd, very good. Operator, we are ready to begin the question-and-answer period..

Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question comes from the line of Jordan Sadler of KeyBanc Capital Markets..

Hi, good morning. This is Jeff Gaston on for Jordan..

Thank you. Good morning..

Good morning, guys. I was just wondering can you talk a bit about what drove the acceleration in your cash leasing spreads, it looks like you hit the highest point in the last couple of years..

Yes, this is Todd. I would say that you’ve heard us talk a lot about our revising our incentive programs, really focusing on that aspect and really trying to use the pricing power of our assets. And I think this is just a reflection of that.

I think you heard Scott go through some of the numbers, we had a high proportion that were over 5%, some double-digit, good portion of double-digit. So it’s really I think just a reflection of that effort over a year now..

And Jeff this is Doug, I would also say that you certainly incentive program in place is producing desire results for fundamentally as effective that we’ve as Todd mentioned got strong hospital systems, we are on the campus are very strong hospital systems and so if you’re in the right location on the right MOB with a right hospital you can push those rents.

If you were off-campus are in a weaker situation even despite the incentive program I don’t think we would see those results. So I think the testaments both with the quality the portfolio we have as well as the incentives in place for our people..

Got it.

So should we view this is more of a trend then and not it’s just particularly a good quarter?.

Yes, if you look at our 2015 components of the guidance ranges for different aspects of the company, we say one to five. So I think five is certainly a really strong number.

In the next couple of quarters for the rest of the year, we do see we know in the third quarter we’ve got a couple leases in one particular property that are as a unfavorable comparison or a renewal simply because we had TI amortized than previously.

So we’ll know that had sort of impact third quarter results still should be positive and then fourth quarter I think should be in line with what you see in the last couple of quarters.

So still very strong I think to assume that its five all the time would not be right, but I think one to five is certainly a good range and moving towards the upper end..

Got it. Thanks a lot guys. That’s all I have..

Your next question comes in line with Kevin Tyler of Green Street Advisors. Please go ahead..

Yes. Hi guys, good morning..

Good morning..

On Page 17of the investor presentation you highlight the deals you’ve looked at and it's clearly stayed away, you stay away from off-campus and we refer to say that on the call as well, but what type of cap rate or what type of cap rate spread might get you interested and what places in particular if there any or might you look at or might you find attractive for more of an off-campus product today?.

I think for us an off-campus asset would have – we really look at it and need to be substantial in size and presence in the market and it needs to be significant or strategic to that health system. So that’s kind of the quality criteria.

And we have some of those assets, certainly we have an asset as you prior just talk about with Mercy Health down in Oklahoma City, it’s a 200,000 square-foot facility, it’s a major strategic investment for them. We’ve got over $100 million invested in that or almost $100 million invested in that. So we view that in that context.

That was a development funding, they at least 100%, but that’s a little different acquisition.

For us I would say certainly that's not a – we’re not going dip below six for those kind of assets at least in the current market, but you're seeing folks payout for those so I think those command probably in the six’s for sure mid-6 is sometimes lower depending on the market..

This is David at the other end of the scale when you get off-campus you basically have the specter of the open asset and so you really have to look at it from DCF view and also most of those in off-campus setting or sometime supported by above market leases from a healthcare and so and so forth.

So it’s just structurally difficult it has the lot of the same characteristics of suburban office.

So to some degree that’s kind of what guys are viewing on the on-campus, off-campus as Todd just said because substantial healthcare investment long-term and scale than that’s less of an issue, but the more you go down in the off-campus that’s away from it, it becomes more like suburban office and you have a lot of asset issues regarding those.

Because a lot of those get started because hospital needed an outreach kind of facility or something like that. And we’ve just had so many years of hospitals not renewing on those kind of properties and stuff like that..

And I think further if the folks want to suggest that it's different today then it used to be and I think it can be a sizable asset, it’s strategic to the health system, but we’ve seen this play out before.

One of the facilities we sold in the quarter is for $1 million with a small outpatient facility from the 90s era that was the same concept and outreach in our retail location and it had a sad and slow painful death until we sold it and it went from a clinic to good location, but ultimately a retail location and not its being torn down and we are starting to develop or tear down and put up a restaurant.

So we are just seeing too many things go the wrong way off-campus, we would be very careful about it..

Okay thanks for all that color, appreciated.

Just turning to CapEx on the guidance front it looks like that moved up quarter-over-quarter and I know you had some developments come on in Denver and Houston and I was wondering if on the revenue enhancing side, if that's what was driving it and then might there be anything else in there or just in general how are you looking at CapEx over the back half of the year?.

Yes. I don't think if you take the two categories of CapEx that it actually went up. I could be wrong maybe a little bit, it was really more in an effort just to clarify as you pointed out the difference between what we’d say is revenue enhancing versus more routine. So I think that – and we show that historically as well.

And in particular this quarter we spent some capital on number of assets, handful of assets and have some history on spending on those assets that really we can link directly to some of these double-digit type cash leasing spreads that Scott spoke about..

Okay thank you..

The next question comes from Daniel Bernstein from Stifel..

Hi, good morning..

Good morning.

How are you?.

Good morning..

I am doing well..

Good..

I guess I also wanted to ask about the construction cost, we’ve heard some early from some peers, I’ve seen your housing side at least you know that construction cost may be up 10% give or take this year.

And is that something you're seeing and how’s that factoring into your thoughts on development?.

Well, Dan I think just in the cycle as we travel around the countries you do, there is a lot of tower cranes and minute you get more and more tower cranes, plywood changes you know everything, kind goes at 10.

But I think, when we’re structuring transactions et cetera that's always in our thoughts of deals that we all thing and we don't kind of get tripped up on that per say. I don’t know..

And I would answer that Dan, that I think what’s the important factor is our rents growing in line with those types of increases and I think the answer is yes, we’re certainly what we are looking Nashville is a great example here, a part of why we are able to embark up on redevelopment of some assets here was a big shift in rental rates in the market.

Meanwhile, we probably had more tower cranes in Nashville’s and we have seen in some years. So as long as the two match up I think it works and frankly if you put it in context we’re probably not that much different than where we were in may be 2007..

Okay. That’s actually really helpful.

Just think about - you are talking about five in three quarters, six in a quarter acquisition versus six and three quarters aid on developments and it would be safe to say that’s still cheaper to build than buy for Class A?.

Yes, I would say you still got good balance there..

Okay. You also had some peers announced JVs on the MOB side with institutional investors, if you thought about any – doing any joint ventures with institutional buyers or even hospitals, so just trying to get your thoughts on if there's any additional opportunities there for you to grow with others capital..

We certainly had those discussions I think it has been a popular topic lately. Certainly something we’re considering it’s nothing eminent to mention anything, but I think there's a lot of as I mentioned the liquidity and transparency in the MOB sector is increasing.

I think that's good as you know we’re selective so there are some opportunities outside maybe our sweet spot that could fit in that.

But I think most importantly it really just validates the attractiveness of the MOB sector, the value of it and other investors maybe new and that is completely new, but more capital of that type pension, money and otherwise that’s interest in the space. So just bringing more I think transparency and frankly more efficient pricing..

Okay. And one more question here. I think Bethany you talk about and David talk about the strengthening of stronger hospital systems getting stronger and weaker hospital systems getting weaker and you are seeing some – maybe consolidation starting in the industry or will as a result of that item in the ACA becoming more entrenched.

When hospital systems merge, are you seeing them or do you think they will, if you haven't seen them.

[Can you think though] monetize assets more in the MOB space, will that create opportunities for you?.

Most of our business [indiscernible] just driven by the people and the doctors and the population. So when you have a rationalization to some degree of inefficiency operator or scale.

You don't really lop off, the service line so to speak are probably maybe some duplication et cetera, but it doesn't really – you don't have a lot of people buying hospitals and closing everything down, because usually there is market share related to that. So I don’t think historically we’ve seen much of….

This is Doug. I mean it’s been consistent I think on the hospital monetization front for the past few years. I mean every year you’ll see one or two sizeable deals, we saw one I guess this most recent quarter one of our peers discussed.

But generally hospital have not been big sellers at this point, they still have a decent access to capital to fund their needs.

So we’re certainly trying to stay in front of them and be aware of those situations when they arise, but I don't know that the consolidation that we’ve seen in the industry is going to be some sort of catalyst or and will be monetizations..

I was thinking more long lines, two hospital systems merge and one of the hospital systems have to fund that acquisition maybe they do it by selling off MOB’s that are part of those campus..

I think you see that more often in the four profit world, just an observation not saying right or wrong, but the four profit world tends to look at it that way a little more than not for profit. So yes it happens, but again you are seeing that with HCAs and others doing some of that..

Okay..

But we’re tend to be focused more heavily towards not for profit..

I appreciate the color. Thank you. I’ll hop off..

Your next question comes from Michael Carroll with RBC. Please go ahead..

Yes, thanks.

Could you guys give us some additional color on your disposition strategy? Has anything changed or what you wanted to sell and what really drove your cap rate expectations lower for your dispositions?.

Well, I think the biggest thing was we obviously ended up with a large pairing of assets that we sold that Doug described. And that went certainly very well, we were pleased and our range was broad wide before.

So we narrowed it down to reflect if that transaction completed at a favorable rate and I think with what we expect for the balance of the year it should even improve that a little more. So that's really just a function of getting further along in the year on timing as well as the dollars that we anticipate.

But it's in general our decision strategy we’re not trying to rotate out of any particular different asset type or anything it was just more selectively looking at asset by asset and identifying those that made sense to whether it’s a market issue.

In this case those two assets they are not as strongly aligned or they are not affiliated with a leading health system. They do have a good tenant, good physician group, but they're not aligned with the Baylor's gotten wide or Mercy Health like or other two inpatient surgical facilities.

So we just see more value long-term in the stronger affiliations..

Okay, great.

And how you discussions progressing with the health systems regarding [brick and ground] on new development projects, last call you guys kind of indicated that those discussions have really accelerated, but the likelihood of completing more deals is still probably other ways out there?.

Yes, you saw we just initiated the one in Denver that you’ve certainly heard about before and even seeing some of you are seeing in property tours and set forth.

So that’s a long time coming finally have that going and I think it just reflects what you're seeing is health systems being very patience and thoughtful about their plans, but knowing they need to address their outpatient service lines and expanding those. So the conversations are good.

I think they have increased as David alluded to in his remarks and that we are seeing progress, it is a slow process with these large organizations back to the consolidation matter in some cases when you see consolidation that becomes the priority for sure of that management team.

So getting them to focus sometimes on these one-off development projects, yes it just takes the process. So we’re encouraged by – it will be slow and steady I think would start..

Okay, great.

And then finally can you give us what the same store would have grown, the cash and line growth would have been without the SIP portfolio and can you give us the leasing numbers of the SIP portfolio currently?.

Sure, just on the leasing percentage 84% is where those properties are, cash flow is just under $5 million a quarter, run rate $5.6 million a quarter. If you look at the same store without those properties total was with them was $6.7 million without it was $3.0 million.

Quarterly if you look at it that way we were at $7.1 million and without it we are $3.8 million. So some strong numbers certainly I think if you look out there across the different MOB portfolios..

Great, thank you..

Thank you..

Your next question comes from the line of [indiscernible] with JPMorgan..

Yes, all my questions have been answered. Thanks guys..

Thank you. End of Q&A.

[Operator Instructions] Excuse me. This concludes our question-and-answer session. I’d like to turn the conference back for any closing remarks..

Okay, thank you very much. We appreciate everyone being on today. I think most of one – everyone is around today so need any follow-up or more detailed questions please give us call. And with I think we – next call is November 2 I think it is. November 3, 4 sometime around that. So talk to you then. Have a good day..

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect..